A BP-led consortium today won the rights to develop Iraq's biggest-producing oilfield after a rival bidder dropped out of a televised auction in a disagreement with the country's oil ministry over fees.

Winning the 17 billion barrel Rumaila oilfield in southern Iraq represents a big boost to BP that has historical links to the oilfield, which is one of the biggest in the world.

The British company's victory came after the oil ministry balked at the fees for extracting the oil that were proposed by both BP's consortium and a rival, led by Exxon-Mobil.

Both parties were told to revise their proposals, but Exxon-Mobil dropped away shortly afterwards.

Oil prices are currently trading at an eight-month high of above $73 a barrel, driven by heavy trading in Asia. US crude for August delivery rose to $73.38 a barrel. It later dipped to $73.06.

The auction for the Rumaila oil field marked the first production sell-off by the war-torn country since the 2003 invasion.

A total of 32 companies are involved in the auction process, which covers several other fields, including BHP Billiton, Chevron, ConocoPhillips and Royal Dutch Shell.

Iraq is auctioning off contracts covering a total of 43 billion barrels of crude hidden in some of the world's largest undeveloped fields.

Multinational oil companies have until now been unable to exploit the reserves because the Iraqi parliament has been unable to agree a legal framework for foreign investment.

The auctions, which were shown live on national television in Iraq, have been mired in controversy.

A parliamentary committee said over the weekend that the Iraqi oil minister, Hussain Shahristani, did not have the right to award the contracts without parliamentary approval.

South Oil Company, Iraq's largest oil company, has also denounced the contracts. Fayad al-Nema, the director of South Oil told Reuters last week: "The service contracts will put the Iraqi economy in chains and shackle its independence for the next 20 years. They squander Iraq's revenues."

The tension has been further fuelled after the Kurdish Regional Government awarded development licences to foreign oil companies without seeking the approval of the Badhdad regime.

See a full list of the approved bidders

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